Soaring energy stocks lifted Canadian pension plans into positive territory in the second quarter despite lingering global credit concerns, according to RBC Dexia Investor Services.
Canadian pension funds earned 1% in the quarter ended June 30, trimming six month losses to 1%.
“Albeit modest, after posting three consecutive negative quarters, it’s a welcome reprieve, especially considering the weakness in other global markets,” says Don McDougall, director of advisory services for RBC Dexia.
Canada’s energy rich equity market continued to buck the worldwide trend as high-flying oil prices made the S&P/TSX composite index one of the best performers in the world—up 9.1% for the quarter. Energy stocks were up 22.9% for the quarter, accounting for more than three quarters of the gain.
Global stocks continued to be the worst-performing asset class, slipping 3.4% in the quarter while underperforming the MSCI World Index by 0.6%. In local currency terms, the index has dropped 12.8% since the beginning of the year, but pension plans have lost 9.0% once exchange rates are taken into account.
Canadian pension plans also saw their fixed income holdings lose 0.3% over the quarter, as mounting speculation over inflation kept domestic bonds in the red throughout the period but managed to outperform the DEX Universe Bond Index by 0.4%.
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SCC Dismisses Mandatory Retirement Appeal
The Supreme Court of Canada has dismissed an appeal by a New Brunswick man who fought his forced retirement at age 65.
Melrose Scott was forced to retire from Potash Corp. four years ago because the company had pension rules which required employees to retire at 65 at the time.
Under New Brunswick’s Human Rights Act, companies are not allowed to impose mandatory retirement, unless they offer employees pension plans containing mandatory retirement provisions.
The Supreme Court ruled that Potash’s pension rules were adopted in good faith and not as a sham to circumvent employee rights.
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B.C. Revises Pension Regulations
British Columbia has revised the Pension Benefits Standards Regulations to allow the use of letters of credit to secure pension fund solvency deficiencies, and to exempt multi-employer plans from certain solvency requirements, says a Mercer Communiqué.
The revisions to the Regulations permit the use of letters of credit to fund solvency deficiencies. To qualify, a letter of credit must be: irrevocable and unconditional, issued in Canadian currency by a bank or credit union that is not affiliated with the employer, and made out to the benefit of a fund holder in trust for depositing into the pension fund.
Defined benefit multi-employer negotiated cost (MENC) plans have been afforded the opportunity to suspend special payments to fund solvency deficiencies.
The administrator of a MENC plan may apply for the Superintendent’s consent to suspend solvency special payments that the plan would otherwise be required to make. The application to the Superintendent must be made before December 31, 2010. The suspension cannot exceed three years from the date specified in the consent.
“The introduction of letters of credit as a funding option is welcome news for plan sponsors,” says the Communiqué. “Letters of credit are an effective form of security that permit financially healthy plan sponsors to secure the pension promise through the combination of funding or security that is most appropriate for the organization.”
Other provinces to introduce letters of credit for funding purposes include Alberta and Quebec, and letters of credit are also permitted for federally-registered plans.
“The changes to the Regulations will also be a welcome recognition of the special characteristics of MENC plans, and the unique set of economic factors in British Columbia, impacting the multi-employer plan sector,” the Communiqué says. “Providing the opportunity for relief from solvency special payment requirements may help MENC plan administrators avoid the undesirable situation of having to reduce benefits.”
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Workers Feeling Burned Out
Downsized staffs paired with increased workloads may be causing a rise in stress levels around the workplace. And that may be the reason why 78% of workers in the United States are feeling burned out at work, according to a CareerBuilder.com survey.
Forty-six percent of workers said their workload has increased over the last six months and approximately the same percentage (45%) say their current workload as heavy or too heavy. Close to a quarter (23%) of workers report they are dissatisfied with their current work-life balance.
More than half (54%) of workers said their companies offer some sort of flexible work arrangements to help manage stress levels and work-life balance and two-thirds indicated that they take advantage of at least one of the programs offered.
When asked which benefits they take part in the most, workers said: alternative schedules (72%), compressed work weeks (24%), telecommuting (15%), summer hours (14%), job sharing (6%).
“Unmanageable stress levels in the workplace can seriously impact an employee’s productivity and home-life,” says Rosemary Haefner, vice-president of human resources at CareerBuilder.com. “Employers today are being much more proactive in offering a variety of programs that promote a healthy work-life balance, and companies and workers alike are reaping the benefits.”
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High Performers Ready to Quit
Forty-seven percent of high performers are actively looking for other jobs—posting or submitting resumes and even going on interviews—according to a study.
The study, by training firm Leadership IQ of Marietta, Ga., also notes that while it’s terrible that almost half of high performers are thinking about quitting, what’s perhaps even worse is that low performers want to stay.
Only 18% of low-performing employees are actively seeking other jobs, and 25% of middle performers are actively looking around.
“High performers keep companies in business so every company is at risk if these people leave,” says Mark Murphy, CEO of Leadership IQ. “The worst part of this is that we typically cause our high performers to quit by how we treat them.”
He adds that managers treat high performers worse than any other employee because they are given tougher projects, which leads to longer hours and more stress. It’s not the low performers, because managers want the project done right. Instead managers turn to their handful of high performers.
“Over and over we ask our high performers to go above and beyond, making their jobs tough and burning them out at a terrible pace,” says Murphy. “Meanwhile, low performers often get easier jobs because their bosses dread dealing with them and may avoid them altogether.”
Leadership IQ surveyed 16,237 employees on a range of workforce and retention issues, and then divided them into high, middle and low performer categories based on their annual performance appraisal scores.
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Institutional Investors Turn to CSAs
A study by Greenwich Associates finds that the use of commission sharing arrangements (CSAs) with equity brokers is becoming more popular with institutional investors in the United States.
More than 45% of institutions say they employ these arrangements, up from the approximately 25% of institutions that reported using CSAs last year.
Overall, U.S. institutions are directing an estimated 16% of total U.S. equity trading commissions via CSAs, a share they expect to increase to 20% over the next 12 months. Among active users of CSAs, the share of commissions allocated through the arrangements grew to 23% this year and is expected to rise to 27% in 2009.
“The last year seems to have marked a peak period for institutions shifting from soft-dollars to CSAs as a means of compensating third-party providers for research and service,” says Greenwich Associates consultant John Feng. “Looking out over the next 12 months, only another 5% of U.S. institutions—mainly mutual funds and investment managers—say they plan to establish their first CSAs.”
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CIBC Mellon Makes the Grade
Moody’s Investors Service assigned a bank financial strength rating of B- and a long-term issuer rating of Aa2 to CIBC Mellon.
The credit rating agency cited the company’s excellent standing in its primary Canadian market, robust governance discipline, excellent capitalization, a lack of material credit risk, and an operations and technology platform, available through its relationship with The Bank of New York Mellon that allows CIBC Mellon to benefit from economies of scale and service.
“These ratings provide our clients with assurances of our strong and effective approaches to governance, risk, and control,” says Thomas C. MacMillan, president and chief executive officer of CIBC Mellon. The ratings also recognize our strong relationship with our parents, and specifically, our ability to offer unmatched, world class solutions to the Canadian market.”